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1 Core IT Capabilities Within Organizations Dr. Mary C. Lacity The Tower of Babel by Pieter Bruegel the Elder, 1563 KbKunsthistorisches Museum Wien, Vienna.

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Presentation on theme: "1 Core IT Capabilities Within Organizations Dr. Mary C. Lacity The Tower of Babel by Pieter Bruegel the Elder, 1563 KbKunsthistorisches Museum Wien, Vienna."— Presentation transcript:

1 1 Core IT Capabilities Within Organizations Dr. Mary C. Lacity The Tower of Babel by Pieter Bruegel the Elder, 1563 KbKunsthistorisches Museum Wien, Vienna

2 2 Session Objectives Understand 9 Core IT Capabilities that should be kept in-house Ensure Value for IT Spend to Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

3 3 Forces Shaping IT Function In-house IT Function Recessions Competition Force cost reduction Core Competence Strategy Business Reliance On IT Maturity & Size of IT Providers Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

4 4 Feeny & Willcocks: IT Capabilities Business Face Supply Face Technical Face Governance Face Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

5 5 Feeny & Willcocks: IT Capabilities Business Face Supply Face Technical Face Governance Face Information Systems Strategy Sourcing Strategy Information Management Strategy Information Technology Strategy Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

6 6 Business and IT Vision Delivery of IS Service Design of IT Architecture Business Systems Thinking Contract Facilitation Technical Architecture Contract Monitoring Vendor Development Technical Doer Relationship Builder IS Leadership; Informed Buying Feeny & Willcocks: IT Capabilities Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

7 7 IS Leadership Business and IT Vision Delivery of IS Service Design of IT Architecture IS Leadership Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

8 8 IS Leadership Integrating IS/IT effort with business purpose & activity Implements structures, processes, and staffing to fill other 8 roles Alignment of IS strategy and business Fosters relationships with senior management

9 9 "I went to the city, I usually had one or two things to do. I made it a point when I went in, I went up to the chairman's office and many times his secretary was there when I'd get there. I'd say, 'tell the chairman and CEO, tell Harry I'm in the building. Could I talk to him? I'm available.' I went right down the hall to the president, who at the time was Michael, and said, 'I'm in town for a week if you have any questions about computing, I'd be happy to talk to you about it.' I would also visit every senior vice president on the executive floor. I would stick my head in the door and say, 'hey I'm in town, what can I do to help?'" -- VP of IS, PETRO2 IS Leadership

10 10 What are the characteristics of good CIOs? Business and People skills are more important than technical skills: “My advice to CEOs is this: Your IT function should be run by a great general manager, not by a traditional technology manager…More and more, business considerations rather than technical ones drive investments in IT. Our businesses are asking, “Why not buy solutions rather than build them? and “How can IT serve the critical needs of the business rather than those narrowly defined by accounting and human resources?” Far too many IT professionals don’t know how to frame questions like these, much less answer them.” -- Gene Batchelder, CFO, GPM Gas IS Leadership

11 11 In a survey of 64 CIOs, Applegate and Elam found that 30% had only a technical background; 33% had only a business background, and 37 had a “hybrid background”. Practice often prescribed: Have the CIO report to the CEO to ensure the CIO has enough authority and power to be effective. IS Leadership What are the characteristics of good CIOs?

12 12 Business Systems Thinker Business and IT Vision Delivery of IS Service Design of IT Architecture Business Systems Thinking Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

13 13 Business Systems Thinker Envisioning the business processes which technology makes possible Focus on business process improvement rather than just IS improvement “To serve customers well, companies need to be proficient in half a dozen key areas: reduced cycle times, reduced asset levels, faster development of new products, improved customer service, increasing empowerment of employees, and increased knowledge sharing and learning. Information technology is a key resource for accomplishing those goals” John Rockart, MIT

14 14 Not all IT managers are welcome in this role: "The IS organization have a tremendous amount to contribute if they ever get out of the back room and be perceived as having an opportunity to participate in the resolution of problems rather than being one of those problems." -- Corporate Planning Manager, Occidental Petroleum Business Systems Thinker

15 15 Proven practices include: IT representation on major business initiatives: Business Strategic Planning Operating Committees Capital Budgeting Committees Educate senior managers on IT capabilities: "We'd make it a point that every one of our executives attended that four day class. Every time we got as many as ten or fifteen people at the general manager level who had not taken the course. I'd call to schedule the course. And we'd schedule it and we'd get the CEO's signature saying, 'You've been selected to attend a computer concepts class. Please be at the homestead on four o'clock on Sunday, signed, Harry Thompson, CEO." -- VP of IS, PETRO2 Business Systems Thinker

16 16 Relationship Building Business and IT Vision Delivery of IS Service Design of IT Architecture Relationship Builder Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

17 17 User-Business Relationship Builder Getting the business constructively engaged in IS/IT issues. Focus on ability to speak “business” language to gain credibility Working with business community to understand cost/service trade-offs, what technology can and cannot do When a unit manager requested a new system that would save $250,000, IT manager had to explain it would cost $500,000 to build.

18 18 Focus on ability to speak “business” language to gain credibility “The senior managers within BAe and even more the managers within the business units, by and large didn’t want to hear people talking pure IT. What they wanted was to hear people talking their language, the language of making airplanes. And we were able to do that, we were able to produce these people who talked their language.” -- CSC Quality Manager (Transferred from BAe) User-Business Relationship Builder

19 19 Often prescribed practices might include: Dedicating systems analysts to specific business units to build relationships and learn about business. Cross-training users and IT Governance Structures that include business users User-Business Relationship Builder

20 20 Technical Architect Business and IT Vision Delivery of IS Service Design of IT Architecture Technical Architecture Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

21 21 Technical Architect Defining architecture standards Centralized computing environment Distributed computing environment Technology renewal (n, n-1, n-2?) Technology replacement Security Disaster recovery management Creating the coherent blueprint for a technical platform that responds to current And future business needs.

22 22 Technical Architect "You shouldn’t outsource technical architecture. [The suppliers] are going to take your architecture where their business is going, not where you want to go. Those that let all their technical architects go, and we have an exposure there because we let most of ours go, and now as I skill up my group, I to build up an expertise that can keep up. It’s probably most contentious in the mainframe area...suppliers want vanilla, and customers want chocolate. And we even have discussions on the supplier's standards. We want to run this security environment, not their standard security environment for these reasons." -- Contract Administrator, PBS5

23 23 Technical Doer Business and IT Vision Delivery of IS Service Design of IT Architecture Technical Doer Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

24 24 Technical Doer: Making Technology Work Rapidly Troubleshoot Problems Technical work-arounds Bypass political bureaucracy What are the stereotypical characteristics of a technical doer?

25 25 Outsourcing Roles Business and IT Vision Delivery of IS Service Design of IT Architecture Contract Facilitation Contract Monitoring Vendor Development Informed Buying Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

26 26 Informed Buying Business and IT Vision Delivery of IS Service Design of IT Architecture Contract Facilitation Contract Monitoring Vendor Development Informed Buying Sourcing strategy, RFP process contract negotiation Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

27 27 Informed Buying Develops a sourcing strategy Analyzes external market for IT/IS services Leadership of the tendering, contract, and service management processes “If you are a senior manager in the company and you want something done, you come to me and I will go outside, select the vendor, and draw up the contract with the outsourcer, and if anything goes wrong it’s my butt that gets kicked by you.”

28 28 Informed Buying Proven practices include: Joint senior executive/IT manager development of IT sourcing strategy Creating RFP and inviting internal & external bids Short term contracts Detailed contracts

29 29 Business and IT Vision Design of IT Architecture Contract Facilitation Contract Monitoring Vendor Development Informed Buying Ensures success of existing contracts User/Supplier Liaison Contract Facilitation Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

30 30 Contract Facilitation Provide one-stop shopping for the business user Develop user guides to the contract Help manage user expectations of the contract Assess and prioritize user demands Determine if user demands will trigger contract excess fees Determine if users are demanding too little

31 31 Contract Monitoring Business and IT Vision Delivery of IS Service Design of IT Architecture Contract Facilitation Contract Monitoring Vendor Development Informed Buying Protect business contractual position; Monitor supplier costs and performance vis-à-vis the contract Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

32 32 Contract Monitoring Monitor vendor performance (service) Review monthly bills (cost) Solve disputes with vendor Refine performance measures as needed Benchmark existing contract against developing market capability Escalation procedures Negotiate detailed amendments

33 33 Vendor Development Business and IT Vision Delivery of IS Service Design of IT Architecture Contract Facilitation Contract Monitoring Vendor Development Informed Buying Develop supplier relationship beyond contract Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

34 34 Vendor Development Identifies opportunities for added-value: 1. Business value-added, in which the supplier applies their expertise to help the customer exploit IT for business advantage. 2. Capacity value-added, in which the supplier infuses new skills and technologies in an effective manner. 3. Utility value-added, in which the supplier provides cheaper IT services. Focus on innovation and exploiting opportunities Explores potential for new vendor services “Yes, [the vendor] can achieve all the things that were proposed ---but where is this famous "added-value" service? We are not getting anything over-and-above what any old outsourcer could provide.” -- IT Services Director, Aerospace Company

35 35 Evolution in the Management of IT Education Learning DELIVERY REORIENTATION REORGANIZATION Service Competence & Right Perception Vision to transform & right agenda Informed Buyer & right sourcing Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

36 36 Evolution in the Management of IT Education Learning DELIVERY Service Competence & Right Perception Focus on establishing operational Credibility, project successes, CIO Role always important, but technical Roles also very important here… Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

37 37 Evolution in the Management of IT Education Learning REORIENTATION Vision to transform & right agenda CIO role is key as is Relationship Building To help educate business About strategic potential Of IT. Then IT “allowed” To become business systems thinkers Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

38 38 Evolution in the Management of IT Education Learning DELIVERY REORIENTATION REORGANIZATION Informed Buyer & right sourcing Rightsourcing, With centralized, Decentralized & Outsourced portfolio Feeny, D., “The Five-Year Learning of Ten IT Directors,” in Managing IT as a Strategic Resource (Willcocks, Feeny & Islei (Ed), McGraw Hill, 1997, pp

39 39 Capabilities & Skills in Emerging IT Function TechnicalBusinessInterpersonal CIOMediumHigh Business Systems Thinking Low/MediumHigh Relationship BuildingMedium High Technical ArchitectureHighLow/MediumMedium Making Technology Work HighLowMedium Informed BuyingMediumHigh Contract FacilitationMedium High Contract MonitoringMedium Vendor DevelopmentMediumHighMedium Feeny, D. and Willcocks, L., “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, Spring, 1998, pp

40 40 Core-Periphery Model Revisited DEMAND Information Management Information Systems Information Technology SUPPLY STRATEGY ENACTMENT CORE Non- CORE ?

41 41 Core-Periphery Model Revisited DEMAND Information Management Information Systems Information Technology SUPPLY STRATEGY ENACTMENT CIO Systems Thinker Relationship Builder Fixer Monitor Facilitator Technical Architect Vendor Developer Informed Buyer

42 42 Conclusion Most critically, the core IT capability model implies migration to a smaller IT function, staffed by highly able people.


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